PPL plan aims to temper rate hikes

Utility commission will allow company to buy power over time.

May 11, 2007|By Christina Gostomski Of The Morning Call

If PPL Electric Utilities today bought the power it will need when rate caps expire, consumer prices would soar 30 percent in January 2010.

But a company plan approved Thursday by the state Public Utility Commission allows the Allentown utility to purchase power in installments. The company hopes the plan will mitigate the total cost of electricity, but no one knows.

"Not to be glib, but the prices will change," spokesman Dan McCarthy said.

Approval of PPL's plan came on a day when the PUC also issued a landmark decision with long-term ramifications on the cost of electricity in Pennsylvania, approving a series of guidelines and regulations intended to temper rising electricity costs and to help consumers prepare for sticker shock as caps on electricity prices expire.

Still, some of the PUC's decisions actually will cost consumers more.

Since the state began deregulation in 1996, electricity rates for most Pennsylvanians have been capped. As part of the deregulation process, those caps are expiring, and industry experts say that in most cases, they expect electricity costs to rise significantly.

In PPL's case, the PUC will allow the company to buy its electricity for 2010 in six auctions to be held this year and in 2008 and 2009.

Commission Chairman Wendell Holland, the only PUC commissioner voting against PPL's plan, said it does not do enough to encourage electricity conservation. "I don't like this plan at all, and I'm not going to support it," he said at the PUC meeting.

Company spokesman McCarthy disagreed, saying PPL is involved in promoting energy conservation through other plans and programs.

The PPL plan approved Thursday is good only for 2010. The utility and other Pennsylvania electric companies must submit proposals to the PUC for how they will handle deregulation in 2011 and subsequent years.

Policies and regulations the PUC adopted Thursday call for a broader approach to electric purchasing than the one approved for PPL, instead recommending that electric companies create a portfolio of electric purchases, like a mutual fund. The PUC suggests electric companies purchase most power at auctions or on the spot, believing such purchases are cheaper than long-term contracts used in the past.

The commission also will allow statewide or multi-territory auctions, hoping to cut administrative costs and lower energy prices.

Some of the PUC's recommendations will cost consumers more. For example, customers who can't afford the rate hike can defer part of their electric bill and gradually pay down the deferred amount. But they will have to pay the utility company interest on the deferred money, similar to a loan.

Another plan approved Thursday will enable the PUC to seek $5 million from the Legislature to educate consumers beginning in July 2008 about rate increases. Electric consumers would pay for that campaign through higher electric bills.

Although the proposal has generated an outcry from Pennsylvanians and organizations such as the Commonwealth Foundation, a conservative Harrisburg group, commissioners said Thursday they thought it was necessary and even overdue.

The PUC's regulatory changes go to the governor's office, standing committees in the Legislature and the state Independent Regulatory Review Commission for approval. The commission's policy changes, such as the prepayment and deferral plans, will go into effect without legislative approval, commission spokeswoman Jennifer Kocher said.

christina.gostomski@mcall.com

717-787-2067

A TYPICAL INCREASE

Power bought today by PPL Electric Utilities would drive customer bills up an estimated 30 percent on Jan. 1, 2010. Regulators adopted a PPL plan Thursday to reduce that jolt.

Electric bill

in 2007

91.67

Electric bill

in 2010

119.17

Source: PPL Corp.

RATES RISING

Rate caps set by a decade-old Pennsylvania law deregulating electrical utilities are expiring, causing monthly bills to climb. Local caps come off on the final day of these years:

PPL Corp.: 2009

Met-Ed: 2010

PECO Energy: 2010

RATE INCREASES

PPL has been able to raise rates incrementally in recent years despite its cap. The increase for a typical residential customer: